Indian Non-Banking Financial Companies (NBFCs) saw a highest growth (10 per cent) among the NBFI economic categories, said M Rajeshwar Rao, Deputy Governor, Reserve Bank of India (RBI), at an NBFC summit recently.
He said that India ranked third globally in Economic Function 2 (EF2) assessment assets, with lending entities playing a pivotal role in its financial sector.
“Usually, finance companies that provide short-term funding are commonly classified within EF2. While many emerging markets experienced a decline in NBFI sector asset shares, India stood out with an increase,” said Rao.
NBFCs accounted for 12.6 per cent of India’s GDP credit ratio as of March 2023, up from 13 per cent a decade ago.
“Globally, collective investment vehicles such as Money Market Funds (MMFs), fixed income funds, mixed funds, credit hudge funds, real estate funds, etc. contribute to around 74 per cent of the NBFI sector assets, the Indian case is quite different. This feature, combined with the fact that NBFCs have assumed certain significance and critically over last few years, makes it imperative that the regulations of the NBFC sector keep pace with the changing landscape and move from a light touch regulatory approach to a more calibrated and nuanced approach to address the growing interlinkages and emerging risks in order to safeguard financial stability.”
